The Importance of Checking your Economic Calendar Everyday

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker!
    Perfect Choice For Beginners and Middle-Level Traders!
    Free Demo Account! Free Education!

  • Binomo
    Binomo

    Honest broker!

The Importance of Checking your Economic Calendar Everyday

For the past decade, every day before I start trading I check the economic calender…except today. I predominantly trade forex so I check out the global economic calendar on DailyFX. Since I trade a wide array of pairs I need to know what major news releases are due out in all the major markets–AUD, CAD, USD, GBP, EUR, CHF, JPY and NZD. The economic calendar provides all the scheduled economic data releases.

Data releases are categorized into low, medium and high impact. Low and medium impact data may cause a few wiggles in the price but shouldn’t disrupt trading much. I don’t alter my trading practices for these data releases. High impact data releases are noteworthy and do affecting my trading practices.

When a high impact data release is coming out I won’t typically have any orders to enter positions near the current price. The reason is that price can become very erratic once the data is released, and it is gambling to jump into a trade right as data is coming out. Therefore, any orders I have to enter are put on hold until after the news announcement, and volatility has settled down.

Orders to enter positions which are at least 50 pips away from the current price (before the announcement) are left where they are and may be filled on the volatility.

Being aware of these high impact data releases is critical. Today I took a trade at exactly 5PM EST (June 11, 2020) because I had noticed a slight anomaly on the last few trading days as this time. The trade occurred in the actual forex market and ended up being taken at the exact moment the New Zealand Reserve Bank issued their rate decision–rate decisions are some of the biggest market events we see!

Needless to say, within about one seconds I knew something was wrong. I quickly looked at the global economic calendar and saw that the volatility I was seeing was due to the news release. The position I took was taking quite a loss, but I managed to grab a “hedge”–a trade that moves in the opposite direction and therefore should offset further losses in my current position–which resulted in the final damage being minimal (that’s why it pays to knows a little bit about forex correlations).

The point is that it could have been bad, very bad. I was trading the GBP/AUD which witnessed quite a bit of volatility, but not as much as NZD pairs. Had I been trading the GBP/NZD for example, I would have likely taken a much larger haircut. My goal was to just trade a small anomaly, expecting about a 10 pip move which I could profit from, instead the pair moves 50 pips almost instantly. That exposed me to a lot more risk than anticipated.

You never know how a trade is going to turn out, which is why I always stress only risking 1% on each trade. With binary options your risk is capped, so you don’t need to worry about an increase in volatility costing you more than you expect. Yet trading right around data releases can be a gamble, and therefore being aware of when it is coming out, and stepping aside for a few moments is usually the prudent choice.

Always check the economic calendar before you sit to down trade. The day you don’t just may be day it ends up hurting you. When things are going really well, or really poorly, is when people typically start to forget about the basics–like being aware of the data releases. So during these high and low times be extra cautious of making sure you are sticking to the basics, such as monitoring your positions size, capping daily losses, checking what news is due out and sticking to your trading plan.

Why Using an Economic Calendar When Day Trading Is Important

As a trader, the economic calendar is one of your best friends. You will only spend one minute with it a day (or less), but that one minute—every day—is crucial if you want to become a consistently profitable day trader.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker!
    Perfect Choice For Beginners and Middle-Level Traders!
    Free Demo Account! Free Education!

  • Binomo
    Binomo

    Honest broker!

Defining an Economic Calendar

An economic calendar shows the scheduled news events or data releases related to the economy and financial markets. New GDP growth rate figures, the latest non-farm payroll numbers, and interest rate decisions—these are all examples of what you may find on an economic calendar.

There are loads of these economic data releases—at least once a week on average, and sometimes every day during particularly busy weeks. These events are listed on the economic calendar, along with the scheduled time of the release.

Each event is graded, and those grades depend on which economic calendar website you use. Minor events that are expected to have a minimal market impact are either marked as “Low” (as in, “low impact”) or they may lack any special markings. Events that may have a market impact are marked as “Medium,” and they usually have a yellow dot or yellow star beside the event. Yellow indicates some caution is warranted at this time. Red stars, red dots, or “High” markings indicate a significant news/data release that is highly likely to move the market in a significant way.

Risk Caused by High-Impact Data/News Releases

As a day trader, or even as a swing trader, the events marked red are the ones you need to be aware of. Volatility around the event is typical and expected, regardless of whether the data comes out above, below, or right in line with market expectations.

Traders know these events cause volatility, and they may decide to sit out while the markets swing by canceling their pending orders. Those canceled orders cause a drop in liquidity right before a market-moving event occurs. Since there are fewer orders to absorb market buy or sell orders (or stop-loss orders) that are triggered by the event, the price will often “whipsaw” quickly back and forth before choosing a more sustained direction.

Reducing Your Risk with the Economic Calendar

Check your economic calendar each morning before you start trading, and jot down the times of the major data releases.

Under normal market conditions, you should know what your risk is on every single trade. The risk on each trade—defined as the difference between your entry price and stop-loss price, multiplied by the position size—should be less than 2% of account equity, and ideally 1% or less.

Typically, your stop-loss order will get you out of the trade at the price you expect, so long as you are trading a stock (or other markets) with a tight bid/ask spread and significant liquidity (enough shares or contracts) at each price level to absorb your orders. However, when high-impact data is released, things can drastically change. You face a high chance of slippage (a worse-than-expected price on an order). What was supposed to be only a 1% risk trade could end up resulting in a 5% loss, for example.

You can’t know exactly what data will be revealed, or exactly how many orders will come into the market upon its release in a reduced-liquidity environment. Because of this unpredictability, professional day traders typically close out their forex, stock, or futures positions three-to-five minutes before the high-impact data’s release. They also avoid taking new trades until after the data has been released. Since that moment of increased risk is scheduled, it can be easily avoided, and it’s usually best to do so.

If you day trade options, you can hold your positions through a major data (or earnings) release. Many options strategies are designed for trading these types of specific events. Options are a bit different than other markets, though. Once you buy an option (paying the premium) your risk is capped—the premium you paid is the potential loss. When you buy an option or close out the trade, you may get slippage, but you can’t lose more than the premium you paid.

How Is Economics Important to Everyday Life?

Economics helps individuals and businesses to make informed decisions in different fields, including finance, governance, law, administration, finance among others. Typically, all people in the society are affected by economics in one way or another. It is not only important in education but also in making critical analysis in different situations.

Being aware of the current economic situation is vital in buying and selling. People tend to talk how economics affect them as buyers, sellers, investors, workers, producers, consumers among others. Therefore, economics gives people the knowledge to understand and interpret different situations, thus, giving them an idea of how certain events will affect them. A country with a population with good economics literacy will benefit from critical analysis on different events that affect the economic situation of a particular country. This allows the country to get a clear approach on how to solve some problems.

General knowledge on economics provides a person with intellectual skills on opportunity costs, allocation of resources and critical evaluation of projects. It also enables consumers to have a good understanding of the market. Studying economics also helps many people to get jobs in different places, including banks, law firms, accounting firms, share brokers, government among others. It provides graduates with different job opportunities.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker!
    Perfect Choice For Beginners and Middle-Level Traders!
    Free Demo Account! Free Education!

  • Binomo
    Binomo

    Honest broker!

Like this post? Please share to your friends:
Binary Options Trading Step By Step
Leave a Reply

;-) :| :x :twisted: :smile: :shock: :sad: :roll: :razz: :oops: :o :mrgreen: :lol: :idea: :grin: :evil: :cry: :cool: :arrow: :???: :?: :!: